2018 Global Outlook: Increased Momentum on Science-Based Targets

For many years, environmentally conscious companies have set targets to contribute to their organization’s specific sustainability efforts. The thinking behind how those goals are developed, though, is beginning to change. More specifically, there’s increasing momentum for companies to align their corporate environmental objectives with climate science.

Enter Science-Based Targets (SBTs).

This collaboration between CDP, World Wildlife Fund (WWF), World Resources Institute (WRI) and United Nations Global Compact provides companies with a pathway to set goals that will help limit global warming to below 2 degrees Celsius, the threshold outlined in the Paris Agreement at COP21. And the practice is gaining traction: 355 companies have committed to SBTs. During 2017 alone, several large multi-national corporations committed to new SBTs and adopted them into their business strategy, including Coca-Cola, Hewlett Packard and Walmart.

Compared to general carbon reduction targets internally set by individual organizations, SBTs follow an internationally-agreed upon methodology and require even deeper carbon consumption cuts. Setting any carbon reduction target – whether a SBT or internal – can be a daunting task, especially when an organization’s operations are environmentally and geographically far-reaching.

Standardization

The SBT initiative establishes standards and methods to assess and quantify an organization’s environmental impact on greenhouse gas emissions, water use and deforestation. This ensures the company sets a robust target that is proportional to its sector, economic performance or impact on global carbon emissions.

Scalability

Similar to GRI guidelines for non-financial performance reporting, committing to a SBT vs. an internally-agreed goal adds weight and relevance to an organization’s environmental strategy. This improves investor and stakeholder confidence in any claims made regarding environmental achievements, and ensures organizations take proportionate responsibility for their contributions to global emissions based on their size and sector – all while accounting for growth.

Accountability

Organizations are held to publicly-announced commitments since the SBT process requires an organization to submit a commitment letter, develop a target, have it validated and then make it public. CDP only permits a 24-month window to turn that statement into an achievable and realistic target for validation. Failure to meet this deadline would invalidate the statement of commitment and potentially create some reputational damage. This structured approach helps businesses maintain momentum as they move from their environmental vision to reality.

Organizations with Scope 3 emissions that account for more than 40% of their overall footprint are required to include them in any SBT. For many organizations already working to reduce emissions, identifying even more opportunity to improve may be difficult. Energy efficiency measures alone are not enough to meet SBTs. Companies that choose to pursue ambitious GHG reductions will need to pursue more aggressive energy management strategies. This may mean implementing energy efficiency programs in conjunction with purchasing electricity from renewable sources, engaging partners in the organization’s supply chain and managing energy more actively across internal departments.

Our Recommendations

Addressing scope 3 emissions is no small task, but the momentum behind adoption of SBTs largely can be attributed to measurable business value. Companies enacting SBTs report better data visibility and quality, reduced operational costs and improved efficiency. As more businesses incorporate SBTs, there will undoubtedly be further progress and investor demand for this approach in 2018.

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